Source: Global Times    Published: 2025-02-10

By Ma Jingjing and Song Lin

Global financial institutions are getting bullish on China's stock market, as the rise of Chinese artificial intelligence (AI) start-up DeepSeek is driving global investors to re-evaluate Chinese tech shares while a booming consumer market during the Spring Festival holidays highlighted the vitality and momentum of the world's second-largest economy.

Leading US bank Goldman Sachs forecast potential gains of 14 percent year-on-year for the MSCI China index by the end of 2025 in its base case, while up to 28 percent in its bull case outlook, according to a research report published by Goldman Sachs on February 4.

The recent launch of DeepSeek R1, among other Chinese AI models, has demonstrated Chinese tech companies' ability to develop globally competitive AI models, according to the research report. "Our valuation, brighter growth prospects and the potential for productivity gains aided by technology breakthroughs should help narrow the valuation gap between leading US and China tech/semi stocks," it said. 

Chinese major stock indexes extended gains on Monday, with the benchmark Shanghai Composite Index up 0.56 percent to 3,322.17 points and the Shenzhen Component Index closing 0.52 percent higher at 10,631.25 points.

Since DeepSeek launched its "reasoning model" R1 on January 20, the Chinese AI firm has quickly garnered global attention, stirring lasting excitement in the tech world with its efficiency and open-source breakthroughs.

DeepSeek-related shares in the A-share market surged for several days. On Monday, several DeepSeek-related stocks surged by the daily limit of 10 percent, including internet infrastructure service provider Shanghai Data Port Co, information tech firm Talkweb Information System Co, and communication products maker Meig Smart Technology Co.

Huang Senwei, senior market strategist at global asset management firm AllianceBernstein, told the Global Times that he held expectations for the A-share market in 2025 on the back of enterprises' profit recovery, abundant policy tools and other favorable conditions.

China has ample policy room to deal with potential external challenges, Huang said. In addition, there is great potential in terms of sparking domestic consumption.

At the start of 2025, more foreign institutional investors have quickened the pace of their investments in the Chinese capital market. Standard Chartered Securities China said on January 17 that its Shanghai branch has obtained a license to conduct securities and business in China. Additionally, Morgan Stanley announced on January 22 that its wholly owned subsidiary futures company in China had officially commenced operations, primarily providing commodity futures brokerage services within China.

"The fundamental reason behind foreign financial institutions' confidence in China's capital market is the sustained recovery of the world's second-largest economy," Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Monday.

The government's package of incremental pro-growth policies implemented since September is producing effects, especially in boosting investment and spurring consumption, Dong said.

The Chinese market, one of the world's largest consumer markets, holds immense potential. Despite challenges at home and abroad, China's economy grew by 5 percent in 2024, meeting the annual target of around 5 percent, official data showed. Organizations like the World Bank and IMF have recently upgraded China's GDP growth forecasts for 2025.

Borge Brende, president of the World Economic Forum, said in an interview with Xinhua in January 2024 that China will continue to be a major engine for global economic growth.

"The high-quality development of the capital market is crucial for building China into a country with a powerful financial sector. More efforts are needed to address structural problems in China's capital market, for example, supply and demand, so as to attract more medium- to long-term capital," Dong said, expressing full confidence in the healthy development of China's capital market in the long run.

Over the past several years, China has been intensifying moves to boost investor confidence and ensure the high-quality development of the capital market. On January 22, Chinese financial authorities unveiled a plan to encourage medium- and long-term funds to enter the capital market to further stabilize stocks' performance.

"Investors are fundamental to the capital market, and protecting their legitimate rights and interests is the top priority of securities regulators… More efforts will be made to build a market ecosystem featuring a more standardized financing environment and more secure investment, promoting the high-quality development of the capital market to reach new heights," Wu Qing, head of the China Securities Regulatory Commission, said at a meeting with investors on Friday.